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Brent Crude oil fails the 87.00

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Brent Crude oil remains stuck in a range between the strong resistance level of 87.00 and the key support level of 83.00. Last week we saw a break attempt on both sides, but both failed highlighting the fact that the commodity is in a pause after the aggressive downward rally from the 93.00 level and more recently from the 88.00 area.

Despite a difficult start to the week for the bear traders, the oil is now trading higher the last couple of days after finding support once again around the 84.30 area, slightly above the key support level of 83.00. On the upside, the 87.00 level which includes the 50-period SMA and the 88.00 barrier are ready to provide immediate resistance for the commodity in case of a rise.

Having a look at the medium-term studies, the ADX has moved down significantly below the 25 level, suggesting a decreasing momentum. Note that the ADX only indicates trend strength and not trend direction. Furthermore, the MACD failed to hold in bullish territory and turned bearish again, while the Stochastic fell below the 20 level, indicating oversold conditions.

These movements strengthen my conviction that we are likely to see further consolidation or an upward corrective wave, perhaps to test the 87.00 – 88.00 area. If it fails to achieve such a break, it could prompt a more aggressive move towards the key support level at 83.00, with the next support level coming around 82.50.

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